ORB Reversals
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Many people trade opening range breakouts and with great satisfaction. They allow you to trade in a fast market with small risk. This is suitable for most, but not for me. I prefer to trade reversals. I have observed countless times where a breakout pops out of its opening range and then violently retraces. I checked if it was reversing on pivots, murrey math levels, correlated markets, etc, etc. No.
What I observed was that breakouts usually reverse at the fibonacci extension levels.
This is the setup, your feedback would be greatly appreciated.
Take the "opening range"( I use the daily close and the 5am open prices as my high and low, this is not exact, you have to modify this based on the action of the Asian session) and then apply a fibonacci extension calculator on top of it. For upper reversal prices, you need to drag the calculator from high to low. For lower prices do the opposite.
I like to use Heiken ashi candles to signal when the trend has lost steam and a reasonable entry can be made. Please never trade these extension levels blindly. That is, don't just set your entries based on them. Unless you use hard stops (consider risk reward). They are frequently accurate price reversal points. But when they are wrong, they are violently wrong.
Note: I don't actually trade off of the 15 minute charts I use constant range bars, but I don't think it's necessary to go into the specifics of those here.
In fast markets these levels are amazingly accurate. Prior to the news today on GBPUSD, the extension level created a perfect buy entry and I have observed for many months the same price behavior.
Stops are contingent on a few factors, usually the size of the price bars. If there is a huge spike I usually wait for a smaller bar before entering. If price spikes to the level and then reverses, I don't chase the trade. If price retraces all the way back to the breakout level I leave it alone. There are quite a few trades I just ignore. I prefer the trades which align exactly as I see this system. There are more than enough setups every week to not chase the market.
I have posted two GBPUSD trades from yesterday and today.
I have also posted the indicator I use to set the ORB along with the template. I am using Broco(WHC) trader so your server time(CMT) will vary.